Autumn Statement: No Changes to Inheritance Tax

Despite the widespread anticipation and column inches leading up to the Autumn Statement, Inheritance Tax was excluded from the Chancellor’s announcements.

Jeremy Hunt spoke for an hour during the delivery of the 2023 Autumn Statement on Wednesday 22 November, announcing a number of changes to help work towards the continued growth of the UK economy. 110 measures have been noted with the Chancellor pulling a final rabbit out of his hat at the end of his speech – a 2% cut to the National Insurance rate for employees.

Some of the highlights include:

• State Pensions to increase by 8.5%, giving an additional £900 per year
• Further consultations on pensions to follow, giving pension savers a legal right to require a new employer to pay into their existing pension pot which will end the hassle of managing multiple pension schemes
• National Insurance cut from 12% to 10% from 6^th January
• Self-Employed class 2 national insurance abolished and class 4 national insurance for the self employed cut to 8%
• Full expensing relief for corporation tax made permanent
• Small business rates multiplier frozen for another year
• Change to R&D tax relief will merge the 2 current schemes and reduce the corporation tax rate for loss-making businesses
• National Living Wage increased to £11.42 per hour from April 2024
• Alcohol duty frozen until August 2024

There are a number of changes to digest over the coming weeks and as always, the devil is often in the detail, so if any of these changes impact you or your business, it is important to seek advice.

The full details can be found here - HM Treasury Autumn Statement 2023

No Reforms on Inheritance Tax

Inheritance Tax creates complexities and concerns for many families, and it had been hoped that a reform of the current practices would be announced within the Autumn Statement. There has been a 12% increase in the amount of IHT paid in comparison to the same period last year, so this is a growing issue.

Inheritance Tax (or IHT) is a tax paid on any assets left to family or friends after someone dies. You can leave up to £325,000 without incurring any tax, but anything above this is subject to IHT at a very high rate of 40%. There are some additional allowances and ways of reducing the amount of IHT applied to an estate, but this requires careful planning and specialist advice.

IHT Exemptions and Reliefs

• There is an extra £175,000 allowance when the main home passes directly to a descendant, provided that the total value of your estate does not exceed £2m.
• If the deceased is married or in a civil partnership, then they can leave everything free of IHT to their spouse.
• Any gifts made to a qualifying charity during your lifetime or within your Will are not subject to inheritance tax.
• If you have made gifts to family or friends within your lifetime and you survive 7 years after making the gifts, then they are exempt from IHT. You have an annual gift allowance of £3,000 that can be carried forward one year if it wasn’t used. 
• You can also make small gifts up to the value of £250 to multiple different people within each tax year, but if you gift over this amount then the extra will reduce your available nil rate sum.
• Parents or Grandparents can give higher amounts to children or grandchildren celebrating a wedding or civil partnership. Up to £5,000 can be given by parents and up to £2,500 can be given by grandparents which will sit outside of the estate for IHT purposes.
• Regular payments such as school fees, maintenance to a spouse, payments for dependent relatives or life insurance policies might also be exempt.
• Some reliefs may be available to anyone who dies that owned a business, farm, land or National Heritage property.

Whilst we have not seen any changes to IHT in this year’s Autumn Statement, it does now give us some clarity on client’s current positions.

There are lots of pitfalls to be cautious of when planning ways to reduce the level of tax that will apply to your estate, which is why it is vital to seek specialist advice.

Calculating inheritance tax payable on an estate can also be very confusing, especially when a family is going through a stressful period of grief.

For more information on Inheritance Tax, planning ahead or administering an estate, please contact our highly regarded Wills & Estates Team in Colchester on 01206 574431 or in Clacton on 01255 221919.